Transforming Inventory Management and Demand-Supply Planning in Vietnam

Vietnam’s dynamic market is evolving rapidly, presenting both opportunities and challenges for businesses managing their demand and supply chains. As one of the fastest-growing economies in Southeast Asia, Vietnam is heavily driven by export-oriented industries such as textiles, electronics, and agriculture. Concurrently, the country is experiencing a rise in domestic consumption, largely fueled by a growing middle class. This dual demand—both global and local—adds significant complexity to supply chain planning, requiring businesses to adopt more advanced and agile strategies to remain competitive.

Industry-specific challenges further complicate inventory management. For sectors like manufacturing and retail, optimizing stock levels is essential for smooth operations and customer satisfaction. Conversely, high-tech industries and fresh food supply chains face the delicate task of minimizing inventory to prevent obsolescence or spoilage. Striking the right balance between maintaining and reducing stock is crucial for maintaining cost efficiency and operational agility.

However, many businesses in Vietnam continue to rely on outdated planning methods, fragmented data, and manual inventory processes. These inefficiencies hinder their ability to adapt to fluctuating demand patterns and supply chain disruptions. To stay competitive in such a volatile market, businesses must rethink their demand-supply planning approach, embracing automation, data analytics, and AI-driven forecasting. This shift toward intelligent solutions will optimize inventory levels, improve decision-making, and enhance supply chain resilience.

Fragmented Planning and Supply Chain Complexities

Vietnam is grappling with significant challenges in aligning demand with supply within its rapidly evolving market. One of the primary issues businesses face is the fragmented planning process, where sales, inventory, and production teams often operate in silos, limiting effective coordination. This lack of synchronization results in inefficient workflows, making it difficult to monitor sales and inventory performance accurately. Many businesses also lack standardized criteria to assess inventory-related issues, further complicating the decision-making process. Without integrated, real-time sales and inventory data, companies rely on slow, manual processes to consolidate information across departments. The rise of Trump 2.0’s trade policies only adds to these complexities, introducing new challenges like increased tariffs and trade protectionism that disrupt the flow of materials and finished goods, especially in industries reliant on imports and exports.

In addition to these challenges, inventory parameters such as service levels and safety stock settings are frequently outdated or misaligned with actual demand patterns. Companies that fail to continuously validate and optimize these parameters risk maintaining inefficient inventory levels, leading to higher holding costs and disruptions in the supply chain. These issues are further compounded by trade restrictions, making it even more difficult for businesses to adapt quickly to rapidly changing supply chain dynamics.

As companies grow, the increasing complexity of managing an expanding number of SKUs and distribution points becomes another significant challenge. Businesses often struggle with traditional, manual methods that make it difficult to track accurate inventory levels, optimize turnover, and respond swiftly to market shifts. This reliance on intuition rather than data-driven insights leads to suboptimal decisions and missed opportunities.

A Strategic Approach to Optimizing Inventory and Enhancing Efficiency

To address the challenges of modern demand-supply planning, companies need to adopt a strategic, technology-driven approach—especially in light of complexities posed by global trade policies. ABeam’s three-step methodology focuses on optimizing processes, streamlining inventory management, and enhancing operational efficiency, enabling businesses to better navigate internal inefficiencies and external disruptions.

1. Transforming the Planning Process The first step is to overhaul the planning process. By identifying existing inefficiencies and aligning the sales, inventory, and production teams, businesses can break down silos and foster cross-departmental collaboration. This alignment ensures all teams work toward a common goal, integrating real-time data and enabling standardized criteria for assessing inventory and sales performance. This foundational change leads to more informed decision-making and smoother operations.

2. Optimizing Inventory Management The next step focuses on inventory management, ensuring that businesses strike a balance between supply and demand. Continuously evaluating and fine-tuning inventory parameters—such as safety stock levels and service levels—helps businesses align inventory with actual demand patterns. Regular optimization of these parameters ensures a reduction in excess stock and minimizes the risk of stockouts, especially in volatile market conditions and with fluctuating trade policies. This approach not only reduces holding costs but also ensures a steady flow of goods, preventing disruptions in the supply chain.

3. Leveraging Automation and AI-Driven Demand Forecasting The final step involves integrating automation and AI-powered demand forecasting to improve planning accuracy. Predictive analytics enable businesses to generate more precise sales forecasts, ensuring optimal inventory levels across different SKUs. Automation streamlines the sales and production planning processes, reducing the need for manual intervention while providing real-time visibility into inventory, sales projections, and production schedules. This integration allows companies to respond more quickly and accurately to market shifts, minimizing disruptions and strengthening the resilience of their supply chains.

Together, these steps provide a comprehensive strategy that helps businesses optimize demand-supply planning, strengthen inventory management, and enhance overall operational efficiency. By implementing this approach, companies can better adapt to current challenges, seize new opportunities, and prepare for future market dynamics.

Use Case: Streamlining Operations and Enhancing Efficiency through SAP and BPR

A multinational pharmaceutical company with a diverse product range and global operations faced substantial challenges in streamlining its supply chain, procurement, distribution, and financial reporting processes. Fragmented systems led to inefficiencies, manual tasks, and hindered decision-making, limiting agility. The company needed to integrate its systems and optimize planning processes to improve data accuracy and overall operational efficiency.

To address these issues, the company implemented a comprehensive solution combining SAP roll-out with Business Process Reengineering (BPR) for planning. The SAP roll-out unified supply chain, procurement, warehouse, and distribution processes, reducing silos and ensuring smoother data flow across functions. Simultaneously, the BPR approach redesigned planning processes like demand forecasting and procurement-to-pay, eliminating inefficiencies and aligning them with best practices.

As a result, the company significantly improved supply chain planning and execution, reducing stockouts and overstocking while optimizing procurement and distribution. Financial reporting became more accurate and timely, enhancing operational efficiency. By integrating SAP with a BPR approach, the company overcame operational challenges, optimized key business functions, and positioned itself to better adapt to future market dynamics.

For each phase of the Deployment Method, streamline the key deployment activities and deliverables into:

‘WHAT’: key deliverables that will be used for Deployment (segregation into ‘Reference’ and ‘Release’ deliverables)

'HOW’: key activities undertaken to achieve those deliverables

‘WHO’: key functions and workstreams that will carry out the activities, aligned to the new Operating Model

MONITOR AND TRACK – ‘Key Measures’ of success for each phase to the new Operating Model

Addressing Supply Chain Inefficiencies with Celonis

In today’s competitive market, many companies face inefficiencies in supply chain and inventory management. Issues such as poor on-time delivery, excess inventory, and component shortages can significantly impact profitability.

For example, one manufacturing plant is dealing with persistent inventory stagnation. Parts replenishment from headquarters takes 5 months, and local sourcing is only 60%. Despite placing orders in advance, fluctuating demand leads to excess stock. Another manufacturer is focused on understanding how component shortages affect downstream processes.

Data-driven actions are essential to address these challenges. For example, to improve on-time delivery (currently at 61%, with an industry average of 78%), companies can:

• Reallocate 5% of inventory from the Binh Duong factory to prevent stockouts of Item "A."
• Increase credit limits for key customers by +3% to ensure smoother order fulfilment.

Using a powerful process mining and analytics tool like Celonis, businesses can gain real-time insights, identify inefficiencies, and take corrective actions quickly.

One common challenge companies face is improving on-time delivery while managing inventory efficiently. Celonis helps identify inventory imbalances, such as reallocating stock or adjusting customer credit limits, to improve on-time delivery rates. With real-time visibility, companies can proactively enhance delivery performance. Fragmented planning across departments is another issue. Sales, inventory, and manufacturing teams often operate in silos, leading to inefficiencies. Celonis bridges these gaps by providing end-to-end supply chain visibility, enabling collaboration based on real-time data, and improving coordination in demand response.

Excess inventory and parts shortages create imbalances that can lead to overproduction or underproduction. Celonis helps pinpoint the root causes of these issues by comparing production data with sales forecasts, allowing businesses to align production schedules with demand. Celonis also optimizes material flows across the supply chain. Tools like BOM analysis and Network Explorer help identify bottlenecks and delays, enabling businesses to take corrective actions quickly.

Celonis not only helps companies respond to immediate challenges but also enables long-term operational efficiency. By enhancing visibility and facilitating smarter decision-making, businesses can streamline operations, reduce costs, and boost customer satisfaction in a highly competitive market.

Conclusion: Defining Clear Objectives for Effective Execution

Improving inventory management and demand-supply planning in Vietnam demands a strategic, cross-functional approach that transcends mere operational adjustments. As Yoshihiro Wake, lead consultant for ABeam Consulting’s global Supply Chain Management expansion and head of the Supply Chain Practice at ABeam Consulting Vietnam, aptly states, "Leadership must first define their objectives—whether that’s reducing inventory to improve the Cash Conversion Cycle (CCC), developing a flexible strategy to manage inventory amidst volatile demand, or other critical goals. Once the direction is clear, it’s essential to collaborate closely with operational teams to refine and implement the solution."

With a well-defined strategic vision, the next step is to align it with on-the-ground execution. This synchronization between high-level goals and daily operations is crucial to addressing challenges like fragmented planning and inefficient inventory management, while fortifying the supply chain against disruptions. By integrating cutting-edge technologies such as SAP, BPR, and AI-powered forecasting into a unified strategy, businesses in Vietnam can optimize their operations, navigate market complexities with agility, and position themselves for sustained success in an increasingly dynamic business environment.